Subscriber login Close [x]
remember me
You are not logged in.

An independent Scotland means higher costs, free trade risks and lack of global support for whisky

Published:  11 June, 2014

Scotch whisky producers face higher costs and EU tariffs, a loss of support from UK embassies, and increased uncertainty if Scotland votes for independence, according to a report from Bank of America Merrill Lynch.

The report, entitled What if Scotland votes for independence? examines the impact a yes vote would have on the Scotch whisky industry. It picks up on currency, free trade, loss of protected status and increased tariffs and costs.

Scotch whiskyWhat if Scotland votes for independence?Bank of America Merrill Lynch has highlighted concerns for the Scotch whisky industry over potentially damaging costs, currency volatility and lack of EU support a yes vote could bring.

"The uncertainty over an independent Scotland's future currency could leave the Scotch industry exposed to greater volatility, potentially impacting exports and pricing decisions," states the report. Most large producers typically invoice in US dollars, meaning exporters hedge their exposure to sterling-dollar movements on a 12-month basis.  Analysts warned: "A volatile currency would likely be more difficult and expensive to hedge, making pricing and planning decisions harder."

Currently Scotch whisky enjoys geographical indication status under EU law, but this could be at risk by independence. This would mean the industry would be under threat of greater overseas competition and increased counterfeiting.

In addition, EU rules allow Scotch whisky to be exported tariff-free across the EU's 28 member states, which may not be carried through after a yes vote.

Global support from the UK's network of overseas embassies, agencies and trade delegations would no longer apply.

Producers might also face more red tape and costs around pension and tax regulation.

The combination of the factors listed above suggests that availability will be restricted and prices will rise for consumers if Scotland votes in favour of independence in September.

David Frost, chief executive of the Scotch Whisky Association, raised concerns recently over voting for an independent Scotland, saying it would be "damaging and difficult to manage" for the industry, Scotland's second-largest, which employs 35,000 people. He said: "As we consider the potential impact of constitutional change, we look for reassurance on how an independent Scotland could deliver a business, regulatory, and export environment at least as supportive as that which the industry currently enjoys."